Recent studies suggest that continuous innovative change leads to knowledge accumulation and complexity of knowledge, and this causes individuals to opt for specialisation in knowledge (Jones, 2009). As a result, innovation has become task of specialised individuals (Audretsch, 1995; Jones, 2009; Wuchtyetal., 2007). Team formation is desirable when team members gain from complementarities, encourage knowledge transfer of idiosyncratic information, and create synergy (Lazear, 1998; Hamilton et al., 2003; Rose, 2002).
Avast body of literature finds that team ownership significantly improves firm performance (Keeleya nd Roure, 1990; Haleblianand Finkelstein, 1993; Finkelstein and Hambrick, 1990). The size of top management team has a positive impact on innovation in the firm (Somech, 2006) and large teams are more likely to radically innovate (West and Anderson, 1996; Jones, 2009). Top management team size has a positive impact on growth of market share (Hambrick et al., 1996).
However, the extant literature is not unequivocal on the role ofteamsizefor firm performance. Many studies on team processes are based on an assumption that a large team size can make coordination, communication, allocation of task and decision making more tedious. Large teams are more likely to have disagreements over firm strategy resulting in increased coordination costs for resolving these disagreements. Large teams exhibit greater dependence on unspecified tasks (Hambricketal., 1996) and are slow in competitive moves (Hambricketal., 1996).
They require greater monitoring and coordination to maintain productivity (Liang et al., 2008). Members of large teams form subteamsand are less likely to have agreement over firm's strategy (Iaquintoand Fredrickson, 1998). An increase in team size brings the possibility of free riding by individual members of the team and reduces its eciency (Alchianand Demsetz, 1972). Large teams may lack commitment, experience more conflicts and becomeineective (Chowdhury, 2005; Amasonand Sapienza, 1997). This body of research suggests that large team size does not foster firm performance-it may even have a negative influence.
Download
Entrepreneurial Teams, Optimal Team Size, and Founder Exits
